The Basic Rules of Financial Responsibility

bySurvival Insight onJuly 6, 2013

If you want to secure a sound financial future, it’s important that you learn (and practice) the basic rules of financial responsibility. These rules don’t change with the times, they’re always the same, and they should always be followed.

If you want to secure a sound financial future, it’s important that you learn (and practice) the basic rules of financial responsibility. These rules don’t change with the times, they’re always the same, and they should always be followed.

Many people started getting in financial trouble with the mortgage crisis of a few years ago. They went to the bank to get a mortgage, the bank told them what they could afford based on their income and they signed on the dotted line.

Unfortunately, listening to the “experts” in that case gave them a mortgage that they couldn’t afford to pay as the interest rates went up. It’s more important than ever for everyone to take control over their own financial situation and learn how to be financially responsible.

Here are some great tips to help get you started down the path of financial responsibility.

Listen to Advice, But Apply It To Your Situation

The decisions you make about your money aren’t going to effect the person who is giving you advice, they will effect you.

It’s a good idea to seek advice from third parties, but make sure you don’t just follow it blindly “because that’s what they told you to do”.

Consider who is giving you the advice. Is it someone who is trying to sell you a product or service? Is it a mortgage lender who will benefit from you taking out the loan? If the person offering advice is going to benefit from you taking their advice, you need to be careful. That doesn’t always mean that it is bad advice, but it does mean you should consider several opinions to make sure they are recommending the same type of action.

Listen, Ask Questions and Learn

Never enter into a financial arrangement without understanding every little detail. Sometimes it’s the details that will cause you problems down the road. Ask questions. Then ask more questions. Then ask even more questions until you finally understand. If there is something you don’t understand, or something seems too good to be true, it’s possible that there is a crucial detail that is being left out of the conversation that you have to uncover.

Don’t be afraid to go through all of the “what if” scenarios too. Sometimes it is helpful to take a friend with you and have them focus on helping you with this.

Don’t Make Financial Decisions Based on Hope

If you make any of your financial decisions based on what you hope will happen, you will get into trouble.

If interest rates are at the lowest rates they have ever been, don’t sign up for an adjustable rate mortgage because those low rates won’t stay that low forever. If you spend your life savings on an investment because it is “going through the roof”, it isn’t reasonable to assume that it will continue to grow at that pace.

Your financial decisions should be rational decisions based on what will reasonably happen, not extreme situations you hope will continue.

Plan For the Bad Things

You have to recognize that bad things are going to happen that will have an effect on your budget.

Energy costs could sky rocket, your insurance could go up or you could lose your job.

There is no end to the list of things that could happen that would put a huge strain on your budget. You have to be prepared to handle them.

The ideal situation is to save every penny you have until you have a six month emergency fund built up in your savings. Don’t use this to save for a vacation or as a college fund or anything else, it should just stay there. This should be money that is available so that “just in case” something unexpected happens, you can handle it.

If You Can’t Afford It, Don’t Get It

Sometimes people use credit cards to buy things “today” because they assume that they will have the money for it in a few months to pay it off You can’t make that assumption because things don’t always work out like you think they will. If you can’t afford to pay off your credit card each month when you get your bill, you shouldn’t buy it. That is much easier to say than it is to actually do, but your financial situation will be much better if you don’t buy what you can’t afford.

Financial Responsibility Summary

A secure financial future is all about making well informed decisions with your money. Practicing financial responsibility today will leave you in much better shape in the future.

What Do You Think?

Do you have any personal rules of financial responsibility that you follow that others could benefit from?